China's housing prices rose 12.9 percent year-on-year during the January to July period of this year, the highest since 1996, the National Bureau of Statistics (NBS) said yesterday.

The average property price, involving residential, office and commercial housing, stood at 2,724 yuan (US$328) per square meter during the first seven months.

The growth rates in six regions, including Jiangxi, Gansu and Tianjin, exceeded 20 percent.

The price of office housing increased rapidly during January to July, which grew a year-on-year 32.3 percent to 6,970 yuan (US$840) per square meter.

Meanwhile, the rising momentum of residential housing price slowed down. The price reached 2,480 yuan (US$299) a square meter, an increase of 10.4 percent from the same period a year ago.

According to Chang Xiuze, a researcher with the Macro-economy Research Institute of the State Development and Reform Commission, the price climb has been stimulated by booming market demands.

NBS's statistics showed that a total of 134 million square meter of housing was sold during the first seven months this year, up 25.2 percent from the corresponding period of last year.

At the same time, the combined sales volume reached 365.7 billion yuan (US$44.06 billion), a 41.l4 percent rise over the first seven months a year earlier.

"China's fast economic development has led to growth in people's incomes and better living standards," said Ji.

"Upgrading living conditions has been listed at the top of the agenda in many households."

To date, a greater percentage of Chinese people think the current interest rate level is unsatisfactory and have become more reluctant to make new deposits.

Furthermore, investment channels in China are rather limited at present, thus consumers prefer to pool money in the property market.

Mou Xin, marketing supervisor of Xie Cheng, a real estate consulting company, pointed out that booming market demands have also been built up by property developers.

The developers' activities mean that prices may rise sharply in the near future.

The developers say it is because the land agreement transfer system will be eliminated and all land used for real estate development should be auctioned on the public market after August 31, which implies land cost may increase.

They also indicate that investment in infrastructure renovation and environmental improvement should be reflected in the housing price, which has been ignored by the people so far.

But both Ji and Mou say they believed housing prices will grow in coming years, but just slightly.

"When the bubbles squeezed and a transparent market established, the trading cost will be reduced and housing prices will be more rational," say the two experts.

The central government's control efforts, including administrative intervention, in the overheated real estate industry have produced initial results, as the growth rate of property investment around the nation dropped slightly in the first seven months of this year.

NBS sources say that combined real estate investment amounted to 605.5 billion yuan (US$72.95 billion) from January to July, a rise of 25.2 percent from 2003's corresponding figure, while growth lost 5.5 percentage points.

The central government's cooling-down policies included strengthening supervision on real estate loans, increasing the loan extension threshold, and establishing a public land auction and tender system.

"As those measures have only been implemented for several months, the effect is not yet notable and the industry will turn on to a sound track in a period of time," said Feng Changchun, director with the Fixed-assets Appraisal Center of Peking University.

Feng said that policies had also helped reduce housing vacancies.

Housing vacancies have been sliding for three straight months, down to 96.78 million square meters at the end of July, down 0.8 percent over the same period a year ago.

And the vacancies in residential housing dropped faster, a year-on-year decrease of 9.2 percent to 54.66 million square meters by the end of July. Shanghai was ranked the top, as the reduction rate for the housing vacancies area chalked up 37.7 percent.

To cash in to ease their funds shortages on new projects, real estate developers are strengthening marketing promotion and offering more sweeteners to customers," Feng said.

(China Daily August 20, 2004)